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Geopolitical Forces Drive Gold, Oil, and Forex Markets: What Traders Need to Know

The recent surge in safe-haven gold prices, a significant jump in crude oil values, and lower yields on government bonds all point to one common factor: geopolitics.

Specifically, concerns over Israel's potential ground invasion of Gaza have intensified geopolitical risks in the region.

currency symbols infographic, man pointing on glass board

Exploring the Impact on Major Forex Pairs, Oil, and Gold:

These recent events have far-reaching effects on various financial markets, including major forex pairs, oil, and gold. Let's explore how these assets are being impacted and what it means for traders.

  1. Gold Opportunities: Gold is a safe-haven asset, making it attractive to traders during geopolitical uncertainty as it tends to retain or increase in value.

  2. Oil Dynamics: Geopolitical events can disrupt oil supplies and affect prices, necessitating a close watch for trading adjustments.

  3. Dollar's Influence: Geopolitical concerns boost the U.S. dollar's strength, impacting currency pairs, and requiring consideration in trading strategies.

  4. EUR/USD Analysis: The EUR/USD pair is influenced by both U.S. inflation data and the Eurozone's economic challenges, presenting trading opportunities based on these factors.

Gold's Safe-Haven Surge:

  • The safe-haven appeal of gold shines brightly in times of geopolitical uncertainty.

  • With a $35 per ounce increase in a single session, gold has once again proven its reliability as a store of value during turbulent times.

  • Traders should keep a close eye on gold prices, as they may continue to rise if geopolitical tensions persist.

XAUUSD chart,  Bar chart showing forex and commodities prices, green/red candles depict daily trading trends. Includes moving average, Bollinger bands, and RSI.
Significant rise in safe haven Gold last week

Crude Oil's Rally:

  • Crude oil prices have surged by nearly 4% due to the geopolitical landscape.

  • Understanding the dynamics of the oil market and its relationship with geopolitical events is crucial for traders.

WTI crude oil ,  Bar chart showing forex and commodities prices, green/red candles depict daily trading trends. Includes moving average, Bollinger bands, and RSI.
WTI Crude Oil surges

Dollar Analysis:

  • Despite a brief pause last week, the Dollar Index is on the rise again.

  • Geopolitical concerns are bolstering the dollar's strength, and even weaker economic data hasn't been able to halt its rally.

EUR/USD  Bar chart showing forex and commodities prices, green/red candles depict daily trading trends. Includes moving average, Bollinger bands, and RSI.
Euro falls against the strong USD

EUR/USD Heading Lower?

  • The EUR/USD currency pair is feeling the pressure following a sell-off triggered by recent events.

Analysing the Week Ahead in Forex: To help traders navigate the upcoming week, we provide a detailed analysis of the EUR/USD currency pair, shedding light on key market dynamics and potential trading opportunities.

EUR/USD Heading to Sub-1.05? The EUR/USD continues to lose ground following Thursday’s CPI-inspired sell-off.

Support around the 1.0550 area provided only temporary respite, and the pair looks like it is heading down to the 1.05 handle again, or even lower.

While the slightly stronger US CPI data has given fresh life to the dollar’s bullish trend, inflation was not too hot to be a game-changer.

But that’s not how the dollar bulls are seeing it, arguing that if anything, the latest inflation data (both CPI and UoM’s survey) support the higher-for-longer narrative.

Technical Analysis:

  • EUR/USD dropped below 1.0570 (100-period Simple Moving Average (SMA), Fibonacci 23.6% retracement of the latest downtrend) and the Relative Strength Index (RSI) indicator on the 4-hour chart fell below 50, reflecting a bearish tilt in the short-term bias.

Possible Scenarios:

  • In case EUR/USD rises above 1.0570 and starts using that level as support, the pair could gather bullish momentum and target 1.0600 (psychological level, static level) and 1.0640-1.0650 (Fibonacci 38.2% retracement, 200-period SMA).

  • On the downside, supports are located at 1.0500 (psychological level, static level) and 1.0450 (end-point of the latest downtrend) if 1.0570 stays intact.

Fundamental Factors: Meanwhile, the economic output in the Eurozone remains very weak, and the ECB has accordingly dropped its hawkish bias, albeit rates will be held at current levels for a long time yet.

Actionable Steps for Traders:

  • Monitor gold prices for potential safe-haven opportunities.

  • Stay informed about geopolitical developments and their impact on oil markets.

  • Keep a close watch on the Dollar Index and its influence on currency pairs.

  • Consider the economic factors affecting the EUR/USD pair and plan your trades accordingly.

Regulatory and Risk Advice:

Trading and investing come with inherent risks, and it's essential to be aware of them. We recommend using FCA-regulated brokers like Vantage to mitigate these risks.

Vantage Markers sales banner for forex trading

Remember, while the potential for significant gains exists, losses are also possible.

Forex Markets:

To sum it up, geopolitics is currently the driving force in financial markets, impacting gold, oil, the US dollar, and major currency pairs.

By staying informed and taking the right steps, traders can navigate these turbulent waters with confidence.

Stay updated with our latest financial analysis and insights by subscribing to Champ Profit.

Keep a keen eye on market developments, and be ready to seize trading opportunities as they arise. Your journey in the world of finance and investing begins today.

Index of Jargon:

  • Forex Market: The global foreign exchange market where currencies are traded.

  • Currency Pairs: The combinations of two currencies being traded.

  • Safe-Haven Asset: An investment that retains or increases its value during times of market uncertainty or volatility.

  • Dollar Index: A measure of the value of the U.S. dollar relative to a basket of foreign currencies.

  • Inflation Expectations: Anticipated future levels of inflation, which can impact currency and asset prices.

  • CPI: Consumer Price Index, a measure of inflation.

  • EUR/USD Currency Pair: A popular currency pair representing the Euro and U.S. Dollar exchange rate.

  • Geopolitical Risks: Risks associated with political events and conflicts on a global scale.

  • Volatile Terrain: A market environment characterized by rapid and unpredictable price movements.

Risk Disclaimer: Trading and investing carry inherent risks, and your capital is at stake. Utilise FCA-regulated brokers like Vantage to minimize these risks.

As with all investments, your capital is at risk. Investments can fall and rise and you

may get back less than you invested.

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